As clients become interested in S&OP (Sales & Operations Planning), also known as SIOP (Sales, Inventory, and Operations Planning) to get in front of customer requirements while simultaneously increasing margins and profits, executives want to know if software is required to support S&OP success.

Is Software Required to Support SIOP Success?
Although the answer to this question is that “it depends”, after almost fifty successful SIOP projects with clients across multiple industries and sizes (from closely held businesses to private equity backed to large, global organizations), SIOP specific software has not been required for success.

With that said, there are benefits to using SIOP specific software products in certain situations. On a related note, ERP and related technologies are integral to success, and data is cornerstone to a successful SIOP process and results.

Is an ERP System Required to Support SIOP?
Almost every client has an ERP system. At their core, ERP systems perform the transactions required to support taking orders, purchasing materials, planning production, picking and shipping product, handling returns, and invoicing customers. As complexity and disruptions abound in the global supply chain, it is no longer sufficient to simply have an ERP system. To thrive during these volatile times, an increasing number of clients are upgrading to modern ERP systems to better support evolving customer requirements, increasing automation and efficiency needs, and predictive analytics capabilities.

In 98% of the client situations, having an ERP system is required to support SIOP success. The only reason we didn’t use 100% is that we worked with an innovative building products manufacturer still using QuickBooks Enterprise to successfully roll out a SIOP process. They were the exception to the rule as they had a CRM (customer relationship management) system and an Excel based forecasting system in place, were progressive in nature, had put process disciplines in place and were in process of selecting an ERP system. The main reason an ERP system is essential to SIOP is because you’ll need to capture demand and supply information to roll up into your SIOP process. Although at times it can prove valuable, it is NOT required (and sometimes not preferred) to use detailed transactional data. On the other hand, there is key demand and supply data stored in your ERP system that will be integral to your SIOP process.

Do You Need to Upgrade from an Outdated ERP System to a Modern ERP System to Implement SIOP?
No, you don’t need to upgrade to a modern ERP system to implement SIOP. Although you will likely improve upon your demand and supply data with a modern ERP system, we have worked with many clients with archaic systems to successfully implement SIOP and achieve results. In most of these situations, they had an ERP upgrade on their IT roadmap but didn’t want to delay progress in getting in front of their customer demand and EBITDA performance. From a SIOP point-of-view, so long as you can get data out of your ERP system, you will have what is needed to succeed.

Do You Need a CRM System to Support SIOP Success?
No, you don’t need a customer relationship management (CRM) system to support SIOP success. With that said, you need CRM type information to support SIOP success. For example, you need to gain sales and customer input to changing demand patterns, new customer opportunities, the strength of key regions and product lines, etc. So long as you can gain access to this information through verbal feedback, spreadsheets or via an extract from CRM, the SIOP process will be successful.

Many of our most successful SIOP clients have a CRM system even if they do not directly tie the CRM system data to the SIOP process. What we see is that as clients use a CRM system, they develop the appropriate process disciplines to improve upon the sales and customer input to the process. For example, a building products manufacturer captures potential business opportunities in Salesforce, but they do not tie the information directly into their SIOP process. Instead, they involve key sales leaders who interpret the CRM data, add market intelligence, and collaboratively build a sales forecast in support of the SIOP process. Results follow. On the other hand, an industrial products manufacturer uses Oracle’s CPQ/ Big Machines, and by connecting that information directly to the SIOP process, the client gained an immediate benefit of visibility to future sales.

Do You Need a Forecasting System to Support SIOP Success?
No, you don’t need a forecasting system to support SIOP success. The majority of our clients including many large, global manufacturers with several facilities across multiple countries implement SIOP successfully without having a demand planning / sales forecasting software. On the other hand, you will need a picture of future demand.

In every SIOP project, we have worked with the client to develop a demand plan. Whether high-volume make-to-stock (MTS) items or make-to-order (MTO) items such as configure-to-order (CTO) or engineer-to-order (ETO) items, you will need a demand plan. In order to look into the future to make the appropriate strategic decisions (manufacturing sourcing, capacity allocation, supply chain network, strategic inventory), you have to start with your expectations of future demand.

Many times, you can build a demand plan using an Excel model. It will be sufficient to get the process started and results occurring and can be automated and upgraded down-the-line. In other situations such as in high volume industries with complex supply chain networks, a forecasting software is recommended to best support your needs in a sustainable way; however, it won’t prevent you from getting started with a simple forecast. If your process would benefit from a forecasting system, there are many software options, ranging from the simple to the sophisticated.

Translating Your Revenue Plan into an Operational Plan
Once you have a sales forecast in dollars, the key is turning revenue projections into directionally correct unit forecasts and resulting capacity and supply plans. If using a software, it should convert from dollars to units easily. With that said, it is frequently more complex than a simple conversion factor. Thus, this translation of dollars into meaningful units is often one of the top drivers of SIOP success.

For example, a life sciences manufacturer brought us on board to specifically turn their revenue plan into a directionally correct operational plan. They could see the dollars coming in the door, but the operational leaders didn’t know how many people would be required, which skills would be needed, or which long-lead time materials to order because they couldn’t translate the demand plan into a consistent and standardized unit of measure. Thus, although they had long-term visibility to revenue, they couldn’t fulfill the revenue on a timely basis without taking on too much risk. By rolling out a demand planning process and turning dollars into standard and meaningful units of measure, they were able to quickly gain the appropriate approvals to hire the appropriate skills, reallocate resources, and purchase the equipment to support their growth plans. They aligned their demand and supply plans.

Similarly, a drone manufacturer had intense specificity with their revenue plans but they could not translate revenue into material purchases so that they could plan ahead with suppliers to secure supply with reduced cost. We worked with the client to devise a process to translate revenue into unit sales by product grouping which were translated into key materials and commodities. We were able to provide a conservative, directionally correct forecast for key suppliers so that we could gain the appropriate approval to put supplier agreements in place to support business growth with shorter lead times and significantly reduced costs.

Both clients had CRM systems although neither used CRM data directly to start the SIOP process as it would have held up progress. Instead, we used data and insights from CRM to support the development of a sales forecast/ demand plan which translated into an operational / purchase plan. It just so happens that neither client had a forecasting system. We developed a demand planning model in Excel that used information from their ERP system to support SIOP in both instances.

Do You Need a Business Intelligence (BI) Software to Support SIOP Success?
No, you don’t need a business intelligence (BI) software to support SIOP success although having business intelligence and analytic capabilities will enable success. At a minimum, you will need to be able to extract data from your ERP and related systems and combine with spreadsheets and other data. On the other hand, if you have a business intelligence system, it is likely you’ll be able to get access to the appropriate data more quickly, analyze trends and slice and dice the information as a part of SIOP to turn data into data into insights.

On the other hand, we frequently see clients get hung up in creating the ideal reporting platform and miss the forest for the trees. As much as standardization of information and pretty charts and graphs might be a nice end state objective, delaying SIOP progress will cause more harm than benefit. The most successful clients start with directionally correct, immediately available information and continually improve upon and refine the information with changing circumstances. They summarize key highlights into a few charts and graphs using PowerPoint and bring clarity to pivotal decisions through the SIOP process and executive SIOP discussion. As advanced BI functionality can be incorporated in a meaningful way, it will be a great addition to the process.

Do You Need Supply Planning Software to Support SIOP Success?
No, you don’t need a separate supply planning software to support SIOP success. For most clients, your ERP system will support your supply planning needs. Capacity planning, production planning, distribution / replenishment planning, material planning and logistics planning are supported with ERP. In some situations, an advanced planning software is preferred to support advanced replenishment needs and/or production scheduling requirements.

Whether you implement SIOP or not, this type of software better supports service, cost and inventory objectives in certain situations. For example, a consumer goods company used an advanced planning software to reallocate orders and capacity between sites and to replenish service centers to ensure high service levels to customers. Similarly, a healthcare products manufacturer supplied its customers’ locations (vendor managed inventory) based on replenishment methods with an advanced planning software.

Do You Need Financial Planning & Analysis Software to Support SIOP Success?
No, you don’t need financial planning and analysis software to support SIOP success. Some ERP software options have robust financial planning capabilities whereas the rest will minimally provide data that can be used in Excel or with a separate financial planning software. Many clients already have add-on software modules to support financial planning, or they have set up business intelligence to support financial planning and analysis. Alternatively, they could utilize S&OP software analytic capabilities.

The Bottom Line on SIOP Software
If you research SIOP software, you’ll find several high-powered solutions rise to the top. However, in most instances, these SIOP software options will include demand planning, supply planning, advanced planning, financial planning, and related BI analytics. Thus, if you need one or more of these options or want to take your processes to the next level, it could make sense to pursue SIOP software. On the other hand, we’ve yet to find a situation where SIOP software was required to implement SIOP and gain substantial results. It is far more likely you’ll need a forecasting software or business intelligence/ reporting and analytics software to supplement your ERP system and support SIOP than anything else near-term.

Different SIOP software options have different strengths in supporting different types of businesses such as high-volume consumer products companies to highly configured-to-order (CTO) and engineered-to-order (ETO) environments. There are also SIOP software options which are better known for strong demand planning functionality, strong financial planning and analysis capabilities, etc. Typically, these software options will only make sense for larger companies because the implementation cost can be substantial.

For the vast majority of companies, substantial progress and dramatic results can be achieved by implementing a SIOP process, using the existing ERP system and related data. In certain situations, a peripheral software such as forecasting and/or BI would add value although will not hinder progress. However, for the right situation and company, a SIOP software can add substantial value and increase sustainability. Thus, of course, the bottom line is that “it depends”.

Data & People: Priorities for Success
Although SIOP-specific software isn’t required to roll out a SIOP process, data is critical. Thus, focusing efforts on cleansing, connecting and consolidating data should be a priority. In addition, focusing attention on your SIOP team will prove invaluable. The most successful SIOP projects have engaged teams, strong leaders, involved sponsors, and they are supported by data analysts/ technical experts. If you’d like to dive deeper into data analytics and business intelligence, contact us to discuss our data services. Start by paying attention to your talent and results will follow.

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